| Glossary of
Financial Terms |
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| Taking
a look at Income-Generating Investments in a Rising Interest Rate
Environment |
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| Income-generating investments
are used to provide exposure to a variety of securities, as well as
deliver income. In other words, an alternative to using only traditional
GICs or bond funds to receive income. With interest rates at low levels
many investors and some experts seem to agree that a period of moderately
rising interest rates is not far off the horizon. |
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| Index-Linked
GICs offer higher growth potential - the ins and outs |
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| Conventional GIC products provide
guarantees of your invested capital as well as a guaranteed return
on your capital. There is a new breed of GIC products that continue
to guarantee your capital from losing money but provide some variability
in terms of your investment return. These products are commonly known
as index linked GICs. |
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| Forget
to renew your deposits? |
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| Neglecting your term deposits
can be costly. Forget to provide your financial institution with renewal
instructions on your GIC or RRSP/RRIF and you might find that your
matured deposits have been automatically renewed for the original
term or for a year - or dumped into a low-interest savings account.
Within the terms of your deposit agreement you may have already agreed
that the financial institution can do any of the above with your investment,
or leave it without earning any interest! |
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| GIC Laddering
offers investors flexibility, liquidity |
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| Investors looking for safe havens
often turn to guaranteed investment certificates (GICs), but in many
cases they do so without realizing that these investment products
can inject flexibility and liquidity as well as security into their
portfolio. Beyond offering a guarantee of principal and a fixed rate
of return, frequently ignored benefits of wisely managed GICs can
include penalty-free access to a source of income just when it's needed,
and the elimination of guesswork in relation to fluctuating interest
rates. |
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| 2002 Ontario
Savings Bonds Information |
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| Historically, rates on this type
of Government Bond are priced somewhat lower than competing GICs rates
offered by the major banks and Trust CO's. To compare the new bonds
with their competitors the enclosed onsite crosslinks will help with
that comparison. The provincial bonds are 100% guaranteed by the Ontario
Government. Minimums start at $100, to a maximum of $500,000, with
3 options available. All are available with annual or compound interest. |
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| GICs:
A new take on a tried and true investment |
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| Guaranteed Investment Certificates
(GICs) have always been a popular choice among those looking for a
low risk interest-earning investment vehicle to add to their portfolio.
However, long gone are the days when GICs offered investors little
more than a safe place to keep their money. |
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| New twist
to Convertible GICs - Buy Mutual Funds; write cheques |
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| Over the past several years competition
in the mutual fund industry has largely been based on companies adding
new and often more exotic types of funds to their families or marketing
"star" managers. Recently however have seen the introduction
of new products within the industry as well as enhancements on some
existing products that will provide investors with more variety. One
new product is a GIC that is convertible to a mutual fund prior to
maturity while improved products include free chequing. |
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| Do your homework
before buying index linked GICs |
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| It seems that most large institutions
have geared their current GIC marketing towards stock linked or index
linked GICs. Most of the advertisements lure your attention with the
potential to earn investment rates of return based on any one or more
stock indices with the comfort of knowing that your principal is guaranteed. |
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| Fixed-income
investments have a lot to offer |
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| If you're looking for a place
to invest your money, but don't want a great deal of risk, GICs and
CSBs aren't your only options - and not necessarily the best ones,
either. While the principal and interest of GICs are insured up to
a point, these investments may not provide you with the return you
want for your hard/earned cash. |
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| Look into
Government Bonds |
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| As an example advertisements
for Government Bonds that offer higher yields in a current market
where 5 year bank GIC rates seam under priced. The question usually
is whether or not the bonds would be a good buy for them. |
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| Strip bonds
- Are they really the investment for you? |
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| There have been several articles
in recent issues of a seniors magazine enthusiastically supporting
Strip Bonds. We have fielded a lot of questions from clients on this
subject and felt it would be appropriate to clarify some points about
this type of investment vehicle. |
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| The lifetime
Term Deposit |
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| A practical alternative to GICs,
T-Bills and Mortgage Backed Securities. With the recent volatility
in interest rates, one of the questions we are being asked by our
clients is, "what do I invest my money in to produce a retirement
income that will maintain my standard of living?" Living expenses
have not gone down, in fact government related services and utilities
have gone up. |
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| What is
the best fixed term to invest for with rates so low? |
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| Very few people other than The
Great Zambini or your fairy godmother can accurately predict how long
interest rates will remain at a particular level or the future direction
of such rates. Unless you have access to infallible data, the best
course of action in almost all cases is to stagger the maturities
of your investments over several years. |
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